Correlation Between JOHNSON SVC and INPOST SA

Can any of the company-specific risk be diversified away by investing in both JOHNSON SVC and INPOST SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining JOHNSON SVC and INPOST SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JOHNSON SVC LS 10 and INPOST SA EO, you can compare the effects of market volatilities on JOHNSON SVC and INPOST SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in JOHNSON SVC with a short position of INPOST SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of JOHNSON SVC and INPOST SA.

Diversification Opportunities for JOHNSON SVC and INPOST SA

0.24

Correlation Coefficient

JOHNSON SVC  INPOST SA

Modest diversification

The 3 months correlation between JOHNSON and INPOST is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding JOHNSON SVC LS 10 and INPOST SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INPOST SA EO and JOHNSON SVC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on JOHNSON SVC LS 10 are associated (or correlated) with INPOST SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INPOST SA EO has no effect on the direction of JOHNSON SVC i.e., JOHNSON SVC and INPOST SA go up and down completely randomly.

Pair Corralation between JOHNSON SVC and INPOST SA

Assuming the 90 days horizon JOHNSON SVC LS 10 is expected to under-perform the INPOST SA. In addition to that, JOHNSON SVC is 2.11 times more volatile than INPOST SA EO. It trades about -0.07 of its total potential returns per unit of risk. INPOST SA EO is currently generating about -0.05 per unit of volatility. If you would invest  1,699  in INPOST SA EO on September 23, 2024 and sell it today you would lose (94.00) from holding INPOST SA EO or give up 5.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

JOHNSON SVC LS 10  vs.  INPOST SA EO

JOHNSON SVC LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JOHNSON SVC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INPOST SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INPOST SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INPOST SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JOHNSON SVC and INPOST SA

The main advantage of trading using opposite JOHNSON SVC and INPOST SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JOHNSON SVC position performs unexpectedly, INPOST SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INPOST SA will offset losses from the drop in INPOST SA's long position.

The idea behind JOHNSON SVC LS 10 and INPOST SA EO pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.